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Sunday, January 21, 2018

CHARTER PARTY INFORMATION

Shell’s additional clause 22 – damages for detention where charterers delay in nominating a berth

We recently considered a question from a member that concerned a fixture on the Shellvoy 5 form of charter plus the February 1999 Additional Clauses. The vessel concerned loaded at a port in Libya and discharged at an India port. At both ports the vessel was delayed in berthing. Owners argued that time counted in full for the delays. However charterers countered and sought to rely on additional clause 22, which reads:

QUOTE:

22 Clearance clause

If owners fail

(A) to obtain customs clearance; and/or

(B) free pratique and/or

(C) to have onboard all papers/certificates required to perform this Charter, either within the 6 hours after Notice of Readiness originally tendered or time would otherwise normally commence under this Charter, then the original Notice of Readiness shall not be valid. A Notice of Readiness may only be tendered when Customs clearance and/or free pratique has been granted and/or all papers/certificates required are in order in accordance with relevant authorities requirements. Laytime or demurrage, if on demurrage, would then commence in accordance with the terms of this Charter. All time, costs and expenses as a result of delays due to any of forgoing shall be for owners account.”

UNQUOTE

Charterers argued that since the vessel did not have the required customs clearance and certificate of free pratique within the time allowed under clause 22 the Notice of Readiness (NOR) at each port was not valid and time did not commence to count.

Owners relied on the statement of facts for both ports which showed that the delay was due to the vessel awaiting berthing instructions from charterers and that the master had protested the non-acceptance of the NORs upon tendering.

The issue to be decided was how owners could be compensated for this delay. The effect of clause 22 is that it alters the common law position that a vessel is able to give a valid NOR even if free pratique or customs clearance has not been granted, as they are regarded as mere formalities, provided that the vessel is not delayed by its failure to have either of these. Therefore, owners should pay particular attention to this clause when the vessel may call at ports where clearances will not be given before the vessel has actually berthed. In such cases consideration should be given to amending the clause.

Whilst in the case at hand laytime or time on demurrage could not run due to the clause 22, owners did have an alternative route by which to claim compensation for the delay. Owners potentially had a claim for damages for detention. Clause 3 of Shellvoy 5 provides:

QUOTE

“Charterers…shall specify loading and discharging berths in sufficient time to avoid delay or deviation to the vessel…”

UNQUOTE

Provided that it could be established that charterers had failed to specify the loading/discharging berths in sufficient time then they would be liable to owners for damages for detention. Authority for this may be found in the case of Samuel Crawford Hogarth and others v. Cory Brothers & Co. Ltd. (1926) 25 Ll L Rep. 464 (PC), where Lord Phillimore said:

QUOTE

"If a ship is prevented from getting to a loading berth owing to an obstacle created by the charterer or owing to the default of the charterer in performing his duty, then it is well established that the shipowner has done all that is needful to bring the ship to the loading place, and that the charterer must pay for the subsequent delay."

UNQUOTE

Accordingly owners were entitled to be compensated for the delay to the vessel by way of damages for detention, which are usually payable at the demurrage rate.

A further illustration of this type of situation would occur where a vessel is delayed because of late nomination. For example, at Milford Haven, 48 hours’ notice is required of the arrival of a VLCC. This is required so that the appropriate number of tugs can be arranged. If the required notice is not given then the vessel may be forced to wait off Milford Haven. If the vessel is chartered on a berth charter then the delay caused would give rise to a claim for damages for detention. Whereas if the vessel had been fixed on a port charter then the charterer could have offset any unused laytime, or if the vessel was on demurrage then demurrage would be payable.

Contact: John Fawcett-Ellis john.fawcett-ellis@intertanko.com